Moderation in food inflation and textile items will help ease wholesale price index-based inflation to 7% in FY12, a leading economic think-tank has said.
"We project that WPI-based inflation will ease to 7% in 2011-12, as compared to an estimated 9% in 2010-11," the Centre for Monitoring Indian Economy (CMIE) said in its latest review of the country's economy here.
A moderation in inflation in food articles and textile items will be largely responsible for lower inflation in FY12, it said.
High-base values will keep inflation in food articles under control and inflation in this group is projected to average 6.7% in FY12.
"This will be less than half of the 16.6% estimated for 2010-11 and 15.3% recorded in 2009-10," the CMIE said.
In FY11, inflation in food items was high, largely because of higher demand.
Various employment schemes have been launched such as the NREGS, which provides assured employment for 100 days to rural unskilled labourers. Implementation of the Sixth Pay Commission recommendations provided a hefty rise in the wages and salaries of government employees.
Wages in the private sector have been rising too and the income of farmers is estimated to have risen by 5.1% in real terms in 2010-11, the CMIE said.
In 2011-12, the real income of farmers is projected to rise. Regular wages and salaries of government employees are budgeted to increase by 7%. This increase will come over a robust 55% increase in 2008-09, 30% in 2009-10 and 18.7% in 2010-11.
"Thus, the demand pressure will be largely responsible for keeping inflation at 7% in 2011-12," the CMIE said.
